Mexico’s Apparel Exports Continue to Rely on the U.S. Market Heavily

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Mexico’s textile and apparel (T&A) exports totaled USD$6,441 million in 2016, fell by 5.1% from 2015. Around 63% of these exports were apparel (or USD$4,061 million), and 37% (or USD$2,379 million) was textiles.

Could be negatively affected by the appreciation of the Mexican Peso against the U.S. dollar, plus the uncertainty associated with the renegotiation of the North American Free Trade Agreement (NAFTA), Mexico’s apparel exports further went down 7.2% in the first half of 2017 compared to 2016.

In 2016, the United States remains Mexico’s top T&A export market with an 87.3% share (up from 87.0% in 2015, 86.7% in 2014 and 84.7% in both 2013 and 2012), followed by Canada with a 1.9% share (up from 1.6% in 2015). Overall, Mexico was the sixth largest T&A supplier for the U.S. market, accounting for 4.3% of the market shares measured by value in 2016.

Nevertheless, Mexico’s T&A exports to the United States fell by 4.7% between 2015 and 2016 (from USD$5,902 million to USD$5,625 million). Product categories that suffered the deepest drop include cotton hosiery (down by 57.3%), men’s and boys’ wool suits (down by 35.9%), manmade fiber underwear (down by 29.0%), and men’s and boys’ cotton woven shirts (down by 27.9%).

Overall, Mexican T&A exporters feel relieved that the United States has decided to withdraw from the Trans-Pacific Partnership (TPP). However, without TPP, the Mexican T&A industry is still expected to face an increased competition from Vietnam and China both in the leading export markets (such as the United States and Canada) and the domestic market. Notably, the Mexican government has decided to lower the Most Favored Nation (MFN) import duty rates on the 73 clothing items and seven made-up textile items effective in January 2019.

References: Textile Outlook International (October 2017)

Author: Sheng Lu

Professor @ University of Delaware

16 thoughts on “Mexico’s Apparel Exports Continue to Rely on the U.S. Market Heavily”

  1. “Notably, the Mexican government has decided to lower the Most Favored Nation (MFN) import duty rates on the 73 clothing items and seven made-up textile items effective in January 2019.” Is this reduction mentioned in your post valid for TC-products imported for manufacturing only ?

  2. @Sheng Lu – I’ve pointed this out to government officials and development agencies on several occasions. Mexico, Haiti, CAFTA-DR countries are all heavily reliant on exports to the US market. Volatility, uncertainty, disruption or price pressures at US retail have highly disruptive consequences in the entire LATAM region. On the other hand Asian and Far Eastern manufacturing locations have the ability to weather these storms much better due to their diversification and penetration of European, Australian, Japanese and Middle Eastern markets. China, India, Bangladesh, Pakistan, Vietnam and Indonesia are all diversified and not overweighted or heavily dependent solely on the US market.

    1. Totally Agree! Somehow I feel Mexico is too comfortable using textile inputs imported from the US through NAFTA, which reduces the incentive to develop the Mexican textile industry. As a result, apparel “Made in Mexico” has no genuine competitiveness in markets other than the United States. Statistics also show that the so called “Western-Hemisphere” is very vulnerable. Most apparel exports from Mexico to the United States are basic items not very time sensitive. Meanwhile, for all these product categories, US fashion companies also source in large quantity from Asia: https://shenglufashion.files.wordpress.com/2017/07/references-and-tables_page_3.jpg

  3. How come Mexican exports to the United States dropped between 2016 and 2017? Is it because countries like China and Vietnam are less expensive and efficient. Will the decrease in the Most Favored Nation import duty impact cause a serge in Mexican Exports to the US?

    1. Good questions! Multiple factors may have caused the decline in Mexico’s apparel exports last year: the appreciation of the currency, demand shift, and uncertainty associated with the future of NAFTA. Personally, I don’t think the competition from Vietnam and China are the leading factor though. The wage level in China and Vietnam continues to rise last year. Neither was any particular trade policy newly implemented last year that favors sourcing from Asia. Regarding the tariff rate—apparel exports from Mexico to the United States currently enjoy the duty free treatment under NAFTA. The MFN rate applies to countries that are also members of the World Trade Organization, but do not have a free trade agreement or trade preference program with the United States. If NAFTA is terminated, Mexican’s apparel exports to the US will be subject to the MFN rate, however. See: https://shenglufashion.wordpress.com/2017/10/14/nafta-members-applied-mfn-tariff-rates-for-textile-and-apparel-in-2017/

  4. With the exponential growth of places such as China, Vietnam, and Bangladesh in the textile and apparel industry I have forgotten places like Mexico in which we have previously sourced from. As these countries are hard to compete with due to there outstanding time and cheap prices, what will countries like Mexico have to do to catch up? Is this at all possible and if not how much of a hit will this bare on the country and its economy/ relevance in the business. America has decreased its manufacturing at home and utilized these overseas producers, but our position is rather different than the one that Mexico holds. Considering it would be difficult for Mexico to align with the pace of these countries, how might they need to adjust if they want to remain players in this industry?

  5. The article states, “Overall, Mexican T&A exporters feel relieved that the United States has decided to withdraw from the Trans-Pacific Partnership (TPP). However, without TPP, the Mexican T&A industry is still expected to face an increased competition from Vietnam and China both in the leading export markets (such as the United States and Canada) and the domestic market.” Why would Mexico be relieved if they are now going to face increased competition?

  6. How do you think the Trump Adminstration will effect these numbers? What factors in addition to increased competition will inhibit Mexico from increasing their export rates?

  7. I found this article to be interesting because as another student commented I oftentimes forget that the USA imports a large number of textiles and apparel products from Mexico because I personally feel like if I look at my tags from my clothing everything seems to be made in Asia. These countries overseas are much cheaper than China which makes them much more attractive in the eyes of companies. What efforts can China make as a country to be able to compete with these countries and their low prices?

  8. I think this article is interesting because as it was commented before, the U.S. is such an important exporter to Mexico. I think it is also interesting that Mexico is being compared to China and Vietnam as competition because I personally put them in two different categories. China seems way further along in comparison to Mexico with it being a leading export market. Could Mexico potentially become a closer competitor to China?

  9. I found this article very interesting. It found it most fascinating to see that Mexico was relieved that the US decided to withdraw from the TPP due to President Trump’s decision. Specifically, Mexican textile and apparel exporters were relieved. This is interesting to me because without TPP, the Mexican T&A industry is expected to face increased competition. Competition with Vietnam and China will occur in domestic and export markets.

    1. This is another example showing that there is no “good” or “bad” trade policy, but “winners” and “losers”. It is also interesting to note that back in the TPP negotiation, Mexico was on the side of the US textile industry and support the strict yarn-forward rules of origin (largely because of Vietnam). But now in the NAFTA renegotiation, Mexico is more on the side of US fashion brands and retailers and support keeping and even expanding the tariff preference level. It is all about business interests.

  10. Prior to taking this class, I was not aware of how much the US imports from Mexico. I feel like when you think of the US importing, Asia is the main area you think of. I was not aware of the strong connection between the US and Mexico. This article also made me think about the most recent case study and how VF corporation holds their Mexico manufacturing plant to be their most beneficial. It shows that Mexico has strong capabilities when it comes to manufacturing and exporting products. It also shows how the the US gains from Mexico.

  11. NAFTA.
    Since NAFTA support yearn forward rule which limited the Mexico’s garments that are used Asian countries textiles. This article’s charts show the amount of export from Mexico to American decreased, which means they strongly rely on America’s T&A. They should develop other trade relationship with other countries or they need to develop their own textile industry that can sell to other countries.

    In this case, Asian countries are hurt by the new NAFTA claim indirectly as the supply chain and cheap labor force offer to Mexico.

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